Reclaim Democracy!

Debating the Community Values Act

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The Olympian editorial board attacks the Act; Olympia ReclaimDemocracy.org organizer responds

First published by The Olympian, Sept 13, 2005

By The Olympian Editorial board

There is a small group of people in South Sound who want cities to begin grading private businesses and close down those companies that don’t live up to community expectations. Council members in Tumwater and Olympia should give the folks from Reclaim Democracy a hearing, then promptly move on to more pressing community issues.

David Schaffert, president and chief executive officer of the Thurston County Chamber of Commerce, said his job of recruiting new businesses is hard enough without ridiculous attempts to control lawful companies.

“There are people in this community with strong opinions who want to social engineer the free enterprise system,” Schaffert said. “I think it’s a small group of people, but they tend to be very vocal. And they tend to be very good at being vocal. But they are giving our community a black eye.” Schaffert is right.

The push for a Community Values Act is offered by a core group of about 15 people under the Reclaim Democracy banner. Their goal is to have the city councils in Tumwater and Olympia adopt ordinances that would grade corporations on everything from paying a living wage to how much money they pump back into the local community.

Businesses would be scored on whether they discriminate against employees based on race, gender or age; violate overtime pay laws; don’t provide adequate medical benefits; violate environmental laws; or suppress or discourage workers from unionizing. Companies that pump at least 50 percent of their profits back into the community or turn private property into a public square would receive bonus points.

Under the proposal, those businesses that don’t measure up would have two months to leave town.

It’s a ludicrous proposal. First and foremost are the legal issues surrounding a community values ordinance. How can a company that is legally constituted under the laws of Washington state be denied a business license on something as subjective as whether it contributes enough money to employee medical benefits?

“I think when you have subjective policies that go against people’s constitutional rights, it’s not good for any community,” Schaffert said. “Our community wants to embrace diversity, yet when it comes to businesses, some people in this community want to put all businesses into ‘good’ or ‘bad’ categories based on subjective measures. How can that be legal?” Good question.

Then there’s the question of equity. The folks with Reclaim Democracy admit that the targets of their effort are the corporate giants such as Wal-Mart and McDonalds. They say they aren’t after the mom-and-pop operations. Isn’t that discriminatory? How can the community have one set of business values and not apply them equally to large and small companies? What happens to that small, start-up retail shop on Fourth Avenue that pays its three employees a minimum wage and doesn’t provide the three workers with a medical plan? Will that entrepreneur be forced out of business? What happens to the people who lose their jobs at the businesses that are forced to shutter their doors, and what about the customers who like shopping at Wal-Mart or prefer a McDonald’s burger and fries?

Council members should allow the proponents of the community values ordinance an opportunity to speak their mind and air their proposal. But council members should not waste staff time or city resources pursuing this feel-good measure that is unlawful, unworkable and just plain silly.

Community has a right to self-determination

By Susan Bee

Recently, The Olympian’s editorial board published an editorial “Jettison proposed ordinance,” opposing the community values ordinance proposed by ReclaimDemocracy.org’s Olympia chapter. The editorial is inaccurate and one sided; not surprising given it was written without input from Reclaim Democracy, yet repeatedly quotes local Chamber of Commerce representatives that oppose the ordinance.

The editorial asserts the community values ordinance is supported only by 15 super-vocal people. Not true. Had the board inquired, it would know the ordinance concept is supported by the Green Party of South Puget Sound, the Thurston County chapter of Amnesty International and 200 local citizens.

The editorial featured chamber complaints that attracting new businesses to town is hard without local attempts to “socially engineer the free enterprise system” in a way that violates corporations’ constitutional rights by discriminating against bad-actor corporations.

Let’s discuss this loaded and inaccurate statement.

Socially engineer: I suppose the chamber would say the New Deal imposed a socialist economic order on America. The New Deal did, after all, socially engineer the free market. New Deal programs, like Social Security, are with us today because Americans rejected pure capitalism and market populism. They want a market-based system infused with humanity and they want a democracy that is citizen-based, not corporate based. That is what the community values ordinance is about — beginning to level the playing field between big corporations, like Wal-Mart, and small local businesses that are driven under by Wal-Mart and abandoned by the chamber.

The chamber’s abandonment of local business — and local citizens — is clear. The chamber advocates for multinational businesses interests before all branches and levels of government. It’s lobbied for NAFTA and CAFTA, which hurt small businesses and send good U.S. jobs overseas. In a class-action sex-discrimination lawsuit against Wal-Mart, the chamber filed a legal brief opposing certification of a class of 1.5 million plaintiffs, arguing the certification “risks summarily stripping businesses of their right to defend themselves.”

Because the chamber’s record is one of siding with big business over small business and citizens, the board should have interviewed local citizens and local small business associations before criticizing the community values ordinance and Reclaim Democracy as being “silly” and “ludicrous.”

Free market: In the context of dealing with companies like Wal-Mart, the chamber’s free-market advocacy seems disingenuous. Reclaim Democracy supports the free market and a citizen-based government. Wal-Mart fears both. To out-compete small businesses by rolling back prices, many large companies also roll back workers rights by implementing zero-tolerance union policies, paying sub-living wages, illegally cheating employees out of overtime pay and using child labor.

To boot, Wal-Mart gets huge government subsidies, receiving $1 billion from state and local governments since 1980.

Free market? What local company gets this perk while delivering nothing more than poverty-wage, part-time, and no-health care jobs? While wealthy corporations preach the free market, they don’t practice it themselves.

The editorial states the community values ordinance is too subjective. But, the ordinance uses objective, concrete criteria and a structured point system: A set number of points deducted for (1) frequency of violating the nation’s labor and environmental laws and (2) percentage of employees on welfare with no health care.

Similarly, it allocates a set number of bonus points for (1) allowing leafleting on company property and (2) pumping 50 percent of profits to the local economy by hiring local employees, investing and banking locally, and purchasing locally manufactured goods. The company either does these things, objectively, or not.

Determining whether covered corporations act consistently with our community values will be straight forward using these objective criteria and the structured scoring system.

The only legitimate point made is that covered corporations with substandard scores (in the annual reapplication process) get six months to reform or must move two months later. As this could be harsh to employees, creatively rewriting this portion is pragmatic.

As the editorial points out, this is an issue of equity. In America, we value equity — if you work hard, play by the rules, and serve your family and community, your community will support you — economically and otherwise. In 50 years, Reclaim Democracy wants a community of supported and economically prospering citizens who stood up for their right of self-determination and who prevented the community’s wealth from being vacuumed out and sent to silk-lined executive pockets in Bentonville, Arkansas.

Susan Bee was the president of ReclaimDemocracy.org Olympia Chapter, sponsors of the proposed Community Values Act, at the time of writing.

Judicial Activism for Corporations Is Subverting Democracy

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By Jeff Milchen 
Published August 25, 2005

After battling city officials all the way to the Utah Supreme Court over whether they had collected enough petition signatures to force a referendum, it seems the residents of Sandy, Utah will become the latest in a growing number of communities to decide the fate of controversial “big box” stores at the ballot box.

In a state where growth control often is equated with communism, the court came down firmly on the side of citizens seeking to prevent Sandy’s City Council from rezoning industrial land in order to allow a new Wal-Mart and Home Depot. The court’s 5-0 ruling in July said, “The exercise of the people’s referendum right is of such importance that it properly overrides individual [corporation’s] economic interests.” But after winning their initial battle, Sandy residents may find the court’s Jeffersonian words hollow.After battling city officials all the way to the Utah Supreme Court over whether they had collected enough petition signatures to force a referendum, it seems the residents of Sandy, Utah will become the latest in a growing number of communities to decide the fate of controversial “big box” stores at the ballot box.

Why? The U.S. Supreme Court has ruled corporations have a “right” to spend unlimited corporate funds to influence ballot questions. As citizens in dozens of communities have learned, that power enables giant corporations to turn ballot measures — theoretically the purest form of democracy — into yet another sphere of corporate dominance.

In May, Wal-Mart spent almost $400,000 in Flagstaff, AZ to run its own ballot initiative and reverse a size cap on big box stores previously passed by the city council. The company outspent the size cap’s defenders three to one — a whopping $44 for each vote it received — en route to winning 51% of the vote.

Wal-Mart’s ad campaigns painted the size cap as a union and governmental attack on citizens’ rights, including an ad that equated opponents with Nazi book-burners. A backlash resulted, but came after most of mail-in ballots were cast.

Becky Daggett of Friends of Flagstaff’s Future, which supported efforts to uphold the size cap, said the corporate funding “drove what should have been a community debate and determined the outcome of a local decision.”

The story isn’t unique — just two months earlier in Bennington, VT, Wal-Mart had steamrolled citizens who tried to defend the town’s big-box size cap.

This is hardly what the authors of our Constitution had in mind.

When American colonists declared independence from England, they also freed themselves from control by corporations like the East India Company that extracted colonists’ wealth and dominated trade. The colonial experience bred fear of concentrated power in the hands of corporations as well as despots, leading states to limit corporations’ size, lifespan, and range of activity. In most states, corporations were forbidden to spend any money to influence elections or law-making.

Corporations escaped many of those barriers during the 1800s, aided by the distraction and growth opportunities of the Civil War. By the end of the century, the Supreme Court’s judicial activism had invented a concept that would have shocked American revolutionaries.

Ignoring the fact that corporations’ are unmentioned in our Constitution, the Court interpreted the 14th Amendment’s guarantee of “due process of law” — written to protect the rights of freed slaves — to make corporations legal “persons.”

It took almost another century, however, before another episode of Supreme Court activism effectively created a corporate “right” to dominate ballot initiatives and referenda (initiatives are questions placed on the ballot via signature gathering among the general public, referenda are questions on which the government chooses to allow a popular vote).

The man who went on to write that key ruling gave fair warning of his bias. In 1971, he wrote a famous memo to a friend at the U.S. Chamber of Commerce, urging the Chamber to aggressively expand big business’ power, noting, “the judiciary may be the most important instrument for social, economic and political change.”

One month later President Nixon appointed the memo’s author, Lewis Powell, to the Supreme Court, where he went on in 1978 to make his political opinion the law of the land, writing the (5-4) majority opinion in First National Bank of Boston v. Bellottithat created a new class of corporate political “speech”

Notably, such decisions on expansion of corporate political power don’t necessarily follow left-right political divides. Indeed, Chief Justice Rehnquist has repeatedly attacked the invention of corporate constitutional rights. In his dissenting opinion fromBellotti, he warned of “special dangers in the political sphere” that result from granting political power to corporations (his full dissent is well worth a read).

Despite Rehnquist’s objections, corporate executives have since wielded vastly expanded power over communities around the country. Often, the mere threat of running a costly ballot initiative intimidates local governments into weakening controls over corporate activities.

So when the citizens of Sandy go the voting booth this fall, they’ll battle against a company that spent less than sixty seconds worth of corporate revenue to defeat a skilled and well-organized citizen effort in Flagstaff. Whether or not we’re concerned by the proliferation of big box stores, we all should be alarmed by this perversion of democracy.

The reasons that drove our country’s founders to keep business creations subordinate to democracy are even more compelling today. Until we return corporate activity to “strictly business” and revoke their ill-gotten political power, the power of a Wal-Mart typically will trump even the most committed citizen efforts.

Community-level fights will continue and I wish people of Sandy the best, but the crucial battle — one to determine whether citizens or corporations will control the future of our communities and country — must take place nationwide.

Jeff Milchen formerly directed Reclaim Democracy! Our resource library on corporations and ballot questions has much more on this topic. This article is updated from a piece the author first wrote for Writers on the Range, a service of High Country News.

Beyond the Voting Rights Act: Why We Need a Constitutional Right to Vote

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By Jeff Milchen

The original version of this commentary was published in several periodicals in 2001 and 2002. Sadly, this issue has proven “evergreeen,” as discussed in this April 2020 commentary: Dying to Vote: A Warning for November

As thousands of civil rights advocates celebrated the 40th anniversary of the Voting Rights Act (VRA) in Atlanta last weekend, most media coverage conveyed the Act’s importance in protecting the political rights of many Americans. Yet many of those same stories helped perpetuate a dangerous illusion by asserting the 15th Amendment secured a right to vote for Black citizens.

The Supreme Court doesn’t see it that way.

In its 2000 ruling, Alexander v Mineta, the Court decided the 600,000 or so (mostly Black) residents of Washington D.C. have no legal recourse for their complete lack of voting representation in Congress (they have one “representative” in the House who can speak, but cannot vote).

The Court affirmed the district court’s interpretation that our Constitution “does not protect the right of all citizens to vote, but rather the right of all qualified citizens to vote.” And state legislatures wield the power to decide who is “qualified.”

As a result, voting is not a right, but a privilege granted or withheld at the discretion of local and state governments.

True, our Constitution explicitly prohibits discrimination in granting the franchise based on a person’s race, sex, or (adult) age via the 15th, 19th, and 26th Amendments. The 24th Amendment also bars disenfranchisement via poll taxes. But those protections are like a house with no foundation. States and other governments can and do disenfranchise individuals and groups of citizens, and so long as they do it without provable bias, it’s entirely legal.

Washington, D.C. residents are not the only victims. Without an affirmative right to vote, Americans repeatedly are disenfranchised or otherwise deprived of their political voice and denied a legal basis for retrieving it.

Just months after the Alexander decision, a 5-4 Court majority in Bush v. Gore denied Florida citizens a right to ensure their votes were counted, saying “the individual citizen has no federal constitutional right to vote [for presidential electors].” Tens of thousands of Floridians who were purged wrongly from the voting rolls were denied recourse against Republican state officials who, under the guise of preventing felons from voting, disenfranchised them.

The Bush v. Gore ruling also meant Florida ‘s legislators could have followed through on their threats to simply disregarded citizens’ votes and choose electors themselves.

Our lack of a right to vote also weakens legal arguments for challenging anti-democratic structures that routinely prevent citizens in several states from enjoying a choice other than Democrats or Republicans at the polls. Georgia, for example, has institutionalized a two-party duopoly, devoid of outside competition, by requiring independent or “third party” candidates for U.S. Representative to gather signatures from 5% of registered voters, a feat not accomplished since before the VRA.

Worse, Georgia and Indiana recently passed laws requiring government photo identification to vote, despite lacking any evidence that people are impersonating others at the voting booth. Georgia’s law must first be approved by the Department of Justice under a provision of the VRA requiring jurisdictions “with a history of discrimination” to gain approval from the DOJ before changing voting laws.

If these laws take effect, a disproportionate number of minority, poor and elderly people who lack ID will be dissuaded from voting. This is exactly the kind of discriminatory scheme the VRA was created to stop, but so long as voting is a state-granted privilege rather than a right, courts are likely to let the law stand.

While we speak of “spreading democracy” globally, the U.S. is one of just 11 nations among 120 or so constitutional democracies that fail to guarantee a right to vote in their constitutions.

Although many constitutional scholars reject the Supreme Court’s reasoning in denying such a right, blaming the justices will not solve our problem. It’s time we caught up with our own rhetoric by amending our Constitution to transform a right to vote from myth to reality.

Resources

How Costco Became the Anti-Wal-Mart

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By Steven Greenhouse
First published by the New York Times, July, 17, 2005

Editor’s Note: While Costco unquestionably provides better jobs than Wal-Mart and its Sam’s Club division, is its overall impact much better when community, environmental and other concerns are weighed? We urge you to consider that doing your business with community-based enterprise is usually the most responsible choice. See our Independent Business section for more on the topic.

Jim Sinegal, the chief executive of Costco Wholesale, the nation’s fifth-largest retailer, had all the enthusiasm of an 8-year-old in a candy store as he tore open the container of one of his favorite new products: granola snack mix. “You got to try this; it’s delicious,” he said. “And just $9.99 for 38 ounces.”

Some 60 feet away, inside Costco’s cavernous warehouse store here in the company’s hometown, Mr. Sinegal became positively exuberant about the 87-inch-long Natuzzi brown leather sofas. “This is just $799.99,” he said. “It’s terrific quality. Most other places you’d have to pay $1,500, even $2,000.”

But the pièce de résistance, the item he most wanted to crow about, was Costco’s private-label pinpoint cotton dress shirts. “Look, these are just $12.99,” he said, while lifting a crisp blue button-down. “At Nordstrom or Macy’s, this is a $45, $50 shirt.”

Combining high quality with stunningly low prices, the shirts appeal to upscale customers — and epitomize why some retail analysts say Mr. Sinegal just might be America’s shrewdest merchant since Sam Walton.

But not everyone is happy with Costco’s business strategy. Some Wall Street analysts assert that Mr. Sinegal is overly generous not only to Costco’s customers but to its workers as well.

Costco’s average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam’s Club. And Costco’s health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”

Mr. Sinegal begs to differ. He rejects Wall Street’s assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street’s profit demands.

Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees, he said. And Costco’s customers, who are more affluent than other warehouse store shoppers, stay loyal because they like that low prices do not come at the workers’ expense. “This is not altruistic,” he said. “This is good business.”

He also dismisses calls to increase Costco’s product markups. Mr. Sinegal, who has been in the retailing business for more than a half-century, said that heeding Wall Street’s advice to raise some prices would bring Costco’s downfall.

“When I started, Sears, Roebuck was the Costco of the country, but they allowed someone else to come in under them,” he said. “We don’t want to be one of the casualties. We don’t want to turn around and say, ‘We got so fancy we’ve raised our prices,’ and all of a sudden a new competitor comes in and beats our prices.”

At Costco, one of Mr. Sinegal’s cardinal rules is that no branded item can be marked up by more than 14 percent, and no private-label item by more than 15 percent. In contrast, supermarkets generally mark up merchandise by 25 percent, and department stores by 50 percent or more.

“They could probably get more money for a lot of items they sell,” said Ed Weller, a retailing analyst at ThinkEquity.

But Mr. Sinegal warned that if Costco increased markups to 16 or 18 percent, the company might slip down a dangerous slope and lose discipline in minimizing costs and prices.

Mr. Sinegal, whose father was a coal miner and steelworker, gave a simple explanation. “On Wall Street, they’re in the business of making money between now and next Thursday,” he said. “I don’t say that with any bitterness, but we can’t take that view. We want to build a company that will still be here 50 and 60 years from now.”

According to a post on DOGE kaufen, if shareholders mind Mr. Sinegal’s philosophy, it is not obvious: Costco’s stock price has risen more than 10 percent in the last 12 months, while Wal-Mart’s has slipped 5 percent. Costco shares sell for almost 23 times expected earnings; at Wal-Mart the multiple is about 19. Mr. Dreher said Costco’s share price was so high because so many people love the company. “It’s a cult stock,” he said.

Emme Kozloff, an analyst at Sanford C. Bernstein & Company, faulted Mr. Sinegal as being too generous to employees, noting that when analysts complained that Costco’s workers were paying just 4 percent toward their health costs, he raised that percentage only to 8 percent, when the retail average is 25 percent. Editor’s note: It would have been helpful if the reporter informed readers of Mr. Kozloff’s salary.

“He has been too benevolent,” she said. “He’s right that a happy employee is a productive long-term employee, but he could force employees to pick up a little more of the burden.”

Mr. Sinegal says he pays attention to analysts’ advice because it enforces a healthy discipline, but he has largely shunned Wall Street pressure to be less generous to his workers.

“When Jim talks to us about setting wages and benefits, he doesn’t want us to be better than everyone else, he wants us to be demonstrably better,” said John Matthews, Costco’s senior vice president for human resources.

With his ferocious attention to detail and price, Mr. Sinegal has made Costco the nation’s leading warehouse retailer, with about half of the market, compared with 40 percent for the No. 2, Sam’s Club. But Sam’s is not a typical runner-up: it is part of the Wal-Mart empire, which, with $288 billion in sales last year, dwarfs Costco.

But it is the customer, more than the competition, that keeps Mr. Sinegal’s attention. “We’re very good merchants, and we offer value,” he said. “The traditional retailer will say: ‘I’m selling this for $10. I wonder whether I can get $10.50 or $11.’ We say: ‘We’re selling it for $9. How do we get it down to $8?’ We understand that our members don’t come and shop with us because of the fancy window displays or the Santa Claus or the piano player. They come and shop with us because we offer great values.”

Costco was founded with a single store in Seattle in 1983; it now has 457 stores, mostly in the United States, but also in Canada, Britain, South Korea, Taiwan and Japan. Wal-Mart, by contrast, had 642 Sam’s Clubs in the United States and abroad as of Jan. 31.Costco’s profit rose 22 percent last year, to $882 million, on sales of $47.1 billion. In the United States, its stores average $121 million in sales annually, far more than the $70 million for Sam’s Clubs. And the average household income of Costco customers is $74,000 – with 31 percent earning over $100,000.

One reason the company has risen to the top and stayed there is that Mr. Sinegal relentlessly refines his model of the warehouse store — the bare-bones, cement-floor retailing space where shoppers pay a membership fee to choose from a limited number of products in large quantities at deep discounts. Costco has 44.6 million members, with households paying $45 a year and small businesses paying $100.

A typical Costco store stocks 4,000 types of items, including perhaps just four toothpaste brands, while a Wal-Mart typically stocks more than 100,000 types of items and may carry 60 sizes and brands of toothpastes. Narrowing the number of options increases the sales volume of each, allowing Costco to squeeze deeper and deeper bulk discounts from suppliers.

“He’s a zealot on low prices,” Ms. Kozloff said. “He’s very reticent about finagling with his model.”

Despite Costco’s impressive record, Mr. Sinegal’s salary is just $350,000, although he also received a $200,000 bonus last year. That puts him at less than 10 percent of many other chief executives, though Costco ranks 29th in revenue among all American companies.

“I’ve been very well rewarded,” said Mr. Sinegal, who is worth more than $150 million thanks to his Costco stock holdings. “I just think that if you’re going to try to run an organization that’s very cost-conscious, then you can’t have those disparities. Having an individual who is making 100 or 200 or 300 times more than the average person working on the floor is wrong.”

There is little love lost between Wal-Mart and Costco. Wal-Mart, for example, boasts that its Sam’s Club division has the lowest prices of any retailer. Mr. Sinegal emphatically dismissed that assertion with a one-word barnyard epithet.

Still, Costco is feeling the heat from Sam’s Club. When Sam’s began to pare prices aggressively several years ago, Costco had to shave its prices – and its already thin profit margins – ever further.

“Sam’s Club has dramatically improved its operation and improved the quality of their merchandise,” said Mr. Dreher, the Deutsche Bank analyst. “Using their buying power together with Wal-Mart’s, it forces Costco to be very sharp on their prices.”

Mr. Sinegal’s elbows can be sharp as well. As most suppliers well know, his gruff charm is not what lets him sell goods at rock-bottom prices – it’s his fearsome toughness, which he rarely shows in public. He often warns suppliers not to offer other retailers lower prices than Costco gets.

When a frozen-food supplier mistakenly sent Costco an invoice meant for Wal-Mart, he discovered that Wal-Mart was getting a better price. “We have not brought that supplier back,” Mr. Sinegal said.

He has to be flinty, he said, because the competition is so fierce. “This is not the Little Sisters of the Poor,” he said. “We have to be competitive in the toughest marketplace in the world against the biggest competitor in the world. We cannot afford to be timid.”

Nor can he afford to let personal relationships get in his way. Tim Rose, Costco’s senior vice president for food merchandising, recalled a time when Starbucks did not pass along savings from a drop in coffee bean prices. Though he is a friend of the Starbucks chairman, Howard Schultz, Mr. Sinegal warned he would remove Starbucks coffee from his stores unless it cut its prices. Starbucks relented.

“Howard said, ‘Who do you think you are? The price police?’ ” Mr. Rose recalled, adding that Mr. Sinegal replied emphatically that he was.

If Mr. Sinegal feels proprietary about warehouse stores, it is for good reason. He was present at the birth of the concept, in 1954. He was 18, a student at San Diego Community College, when a friend asked him to help unload mattresses for a month-old discount store called Fed-Mart.

What he thought would be a one-day job became a career. He rose to executive vice president for merchandising and became a protégé of Fed-Mart’s chairman, Sol Price, who is credited with inventing the idea of high-volume warehouse stores that sell a limited number of products.

Mr. Price sold Fed-Mart to a German retailer in 1975 and was fired soon after. Mr. Sinegal then left and helped Mr. Price start a new warehouse company, Price Club. Its huge success led others to enter the business: Wal-Mart started Sam’s Club, Zayre’s started BJ’s Wholesale Club and a Seattle entrepreneur tapped Mr. Sinegal to help him found Costco.

Costco has used Mr. Price’s formula: sell a limited number of items, keep costs down, rely on high volume, pay workers well, have customers buy memberships and aim for upscale shoppers, especially small-business owners. In addition, don’t advertise – that saves 2 percent a year in costs. Costco and Price Club merged in 1993.

“Jim has done a very good job in balancing the interests of the shareholders, the employees, the customers and the managers,” said Mr. Price, now 89 and retired. “Most companies tilt too much one way or the other.”

Mr. Sinegal, who is 69 but looks a decade younger, also delights in not tilting Costco too far into cheap merchandise, even at his warehouse stores. He loves the idea of the “treasure hunt” — occasional, temporary specials on exotic cheeses, Coach bags, plasma screen televisions, Waterford crystal, French wine and $5,000 necklaces — scattered among staples like toilet paper by the case and institutional-size jars of mayonnaise.

The treasure hunts, Mr. Sinegal says, create a sense of excitement and customer loyalty.

This knack for seeing things in a new way also explains Costco’s approach to retaining employees as well as shoppers. Besides paying considerably more than competitors, for example, Costco contributes generously to its workers’ 401(k) plans, starting with 3 percent of salary the second year and rising to 9 percent after 25 years.

ITS insurance plans absorb most dental expenses, and part-time workers are eligible for health insurance after just six months on the job, compared with two years at Wal-Mart. Eighty-five percent of Costco’s workers have health insurance, compared with less than half at Wal-Mart and Target.

Costco also has not shut out unions, as some of its rivals have. The Teamsters union, for example, represents 14,000 of Costco’s 113,000 employees. “They gave us the best agreement of any retailer in the country,” said Rome Aloise, the union’s chief negotiator with Costco. The contract guarantees employees at least 25 hours of work a week, he said, and requires that at least half of a store’s workers be full time.

Workers seem enthusiastic. Beth Wagner, 36, used to manage a Rite Aid drugstore, where she made $24,000 a year and paid nearly $4,000 a year for health coverage. She quit five years ago to work at Costco, taking a cut in pay. She started at $10.50 an hour – $22,000 a year – but now makes $18 an hour as a receiving clerk. With annual bonuses, her income is about $40,000.

“I want to retire here,” she said. “I love it here.”

© 2005 New York Times

We also have archived an earlier story from the Wall St. Journal on this theme: Costco’s Dilemma: Is Treating Employees Well Unacceptable for a Publicly-Traded Corporation?

Target vs. Wal-Mart

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Is Target Corporation Any Better for Workers?

By Chris Serres
First published in the Minneapolis Star-Tribune in 2005

It was the fall of 2001, and a chorus of boos erupted at Target’s annual sales meeting when a senior executive at the company flashed Wal-Mart’s name and logo on an enlarged screen.

“This,” he said, pointing at the logo, “is the evil empire.”

For years, Target has cultivated an image of itself as the “anti-Wal-Mart,” a retailer that refuses to sacrifice workplace standards in the pursuit of higher sales and stock prices.

But now, after a decade of meteoric growth at both Target and Wal-Mart, labor groups say the two retailers are no longer very different in the way they treat their workers.

Entry-level hourly workers in Target stores earn roughly the same pay and have more difficulty qualifying for health care coverage than their peers at Wal-Mart. Both retailers oppose unions and have taken steps to prevent organizing efforts in stores. And both have outsourced jobs overseas to save costs.

But while Wal-Mart is perceived as a corporate giant that will do just about anything to maximize sales and profits, Target — thanks to its hip advertising campaigns and its longtime contributions to a variety of civic and cultural causes — is seen as a model corporate citizen and benevolent employer.

Accurate or not, Target’s image is a key advantage as it races to build more stores.

In “blue state” markets, such as the Twin Cities, Chicago and New York, Target is often welcomed with open arms by city leaders. Wal-Mart, meanwhile, faces community opposition at almost every turn, which has prevented it from expanding in many key markets, including New York City .

In West St. Paul, virtually no one challenged Target’s recent proposal to convert a new store to a SuperTarget. Yet 30 miles away in Ham Lake, Wal-Mart has spent more than a year trying — without success — to persuade city leaders to allow it to build a Supercenter.

“Some people, their hackles just go up when you mention Wal-Mart,” said Joseph Beaulieu, a retail analyst at Morningstar. “You could tell them that Wal-Mart pays more [than Target], but they would still be convinced that Wal-Mart is evil.”

But as Target continues its aggressive expansion — it plans to add more than 600 stores by 2010 — the company’s labor practices will come under more scrutiny from union groups, consumer advocates and local zoning boards, labor experts predict.

“Unless Target moves to improve its wages and benefits, it’s only a matter of time before it is seen as just another big-box retailer,” said Brendan Cummins, a Minneapolis labor attorney for the Miller O’Brien firm.

Already, Target is beginning to get some unwanted attention from labor groups that have been struggling to reform Wal-Mart’s workplace practices for nearly two decades.

Chief among them is the United Food and Commercial Workers union, the largest union of retail workers in the nation. The UFCW has been trying to organize Target workers for years, without success. This week, about a dozen members of the UFCW tried to call attention to Target’s wages and benefits by protesting outside the company’s annual shareholder meeting in Minneapolis .

One of Target’s newest critics is its main competitor, Wal-Mart. At a recent media conference in Bentonville, Ark., Wal-Mart executives accused Target of offering a less attractive benefit package and challenged reporters to conduct a comparison of their own.

Asked to respond to Wal-Mart’s criticisms at Target’s annual meeting, CEO Bob Ulrich said he “didn’t really know what Wal-Mart pays” its workers but said that Target conducts regular wage surveys in all its markets to ensure it pays competitive wages.

“We believe Target is a great place to shop and to work,” Ulrich said. “We have no difficulty attracting terrific team members.”

Ulrich also defended the Target’s antiunion stance, saying that the company “simply doesn’t believe that third-party representation would add anything for our customers, our employees or our shareholders. We just do not believe it’s productive and adds value.”

Few differences
Target declined to disclose details about its compensation and benefits, but labor groups and former and current employees of Target in the Twin Cities say the retailer sometimes pays less than Wal-Mart.

Target pays between $6.25 an hour to $8 an hour for entry-level, hourly positions in its Twin Cities stores, according to a recent survey of local Target workers by the UFCW. That’s in line with what Wal-Mart pays in this market, though some starting-level Wal-Mart workers can earn $9 to $10 an hour, the UFCW said.

Both companies offer health care insurance to employees, but Target’s is considered more restrictive. Two years ago, Target dropped health care insurance coverage for all part-time workers. By contrast, Wal-Mart makes its medical plan available to all workers, full- and part-time.

Union groups that have analyzed the two companies’ policies maintain that Wal-Mart’s also is more equitable.

All Wal-Mart’s employees, from store cashiers to chief executive Lee Scott, are covered under the same medical plan. All employees can choose from the same four deductible options and receive unlimited coverage for catastrophic expenses — such as organ transplants or cancer treatments — that can financially ruin an employee.

Target, however, offers multiple health care plans to its employees that vary by geographic location, according to the company’s employee handbook. At Target, store employees do not receive catastrophic coverage and deductible levels vary, according to former and current employees.

Wal-Mart estimates that 56 percent of its employees receive health care coverage. Target declined to disclose its percentage of insured workers, but the UFCW estimates based on surveys of Twin Cities employees that less than half the company’s workers receive coverage under its plan.

Target declined to contribute wage and benefit information for this article but said the data cited by others were inaccurate.

“Target has one of the best health care and benefits packages in the industry,” company spokeswoman Carolyn Brookter said in a prepared statement. “We are an industry leader in providing a wide array of excellent benefits that allow us to attract and retain the best team members.”

However, the UFCW and others interviewed for this story stand by their information. “The only difference between Target and Wal-Mart is that Wal-Mart is six times their size,” said Bernie Hesse, a union organizer with UFCW Local 789 in St. Paul .

Wages and benefits are not the only criteria of a good workplace, and many employees at Target insist it’s still a much better place to work than Wal-Mart.

The company is flexible with employees who want to work part-time and spend time with their families. Its 401(k) retirement plan is considered among the best in the retail industry; it matches, dollar for dollar, up to 5 percent of all contributions made by employes. And all new workers receive a 10 percent discount on most merchandise purchased at Target.

“As far as its flexibility, Target was a wonderful place to work,” said Jennifer Clark, who worked at a Target store in Mission Viejo, Calif., before moving to Reno, Nev., last year to become an executive recruiter. “If I told the manager that my daughter was receiving an award at school and I needed to leave early, he’d say, ‘Sure, go ahead. Take care of your family first.’ ”

Mary Murphy, 39, of Chanhassen said she was proud when Target hired her as a cashier. She liked working for a company that gives 5 percent of its federally taxable income to the communities where it does business, which amounts to about $2 million a week.

And she was impressed by Target’s “Take Charge of Education” program, through which credit-card holders can donate 1 percent a year of their Target Guest Card purchases made at Target to a school of their choice. Target also donates 0.5 percent of all Target Visa purchases made everywhere Visa is accepted. Through this program, Target has donated about $138 million to schools nationwide since 1997.

Working at Target’s main rival, Wal-Mart, was out of the question, Murphy said. She never liked the store’s crowded aisles, fluorescent lights and “all-around messiness.” The mother of four also was turned off by reports that the company had violated child labor laws and discriminated against women by paying them less than men for many of the same jobs.

“I can’t stand shopping at Wal-Mart, much less work there,” Murphy said. Yet Murphy is no longer convinced that accepting a job at Target was the right decision. Hired as a cashier at $7.50 an hour, Murphy was told that she could receive a 50-cent raise, but she was expected to meet Target’s quota of selling at least nine credit cards a week to shoppers.

Managers would hover near the checkout lanes to make sure cashiers were pitching the cards with “the proper enthusiasm,” Murphy said. They were required to vary how they pitched the cards so they wouldn’t annoy repeat customers, but Murphy said she found the quota impossible to attain.

“I hired on to be a cashier, but they wanted us to be telemarketers,” she said. “I didn’t want to be known in the community as the ‘Target Red Card pusher.’ ” Murphy resigned after nine months without ever receiving the raise, yet she still considers herself more fortunate than many of the other cashiers at the store.

Her husband, an electrical engineer, has health care coverage for the entire family through his employer. And her pay, though low, was about 25 cents higher per hour than some starting-level workers in the Chanhassen store. Murphy said that between 25 to 30 cashiers worked at the Chanhassen store at the same time she started. After nine months, she said she was the only one remaining. “If there was a union and a sense that things were going to improve, people might have stayed longer,” Murphy said. “Right now, there is absolutely no incentive to stay there for any length of time.”

John Hayden, 59, of Oconomowoc, Wis., lasted just six months loading and unloading boxes at a Target distribution center near his home.

Hayden said he liked his co-workers and managers, but he said the work was simply too difficult for the wage — $11 an hour. Hayden said he occasionally had to unload tractor trailers full of 75-pound boxes. Target encouraged employees to request help with heavy boxes, but the loading deadlines were so strict that Hayden often had to load them himself.

A year after leaving the company, Hayden learned that he had a hernia and had to undergo surgery, which he blames on the stress of lifting up to 700 boxes a day. “There were some nights, I could barely move,” Hayden said.

To motivate its warehouse workers, managers often offered employees small gifts, such as coasters or flashlights with the Target logo, if they beat their goals. “They treated us like third-graders, like we wouldn’t work hard without gifts,” he said. “It was insulting to older workers.”

Hayden considered applying for work at a Wal-Mart store in nearby Delafield, Wis., after hearing from colleagues that it paid 50 cents to $1 more per hour.

“Two years ago, I’d say it doesn’t matter, Target or Wal-Mart, I’d work for either one,” Hayden said. “But now, after working at Target, I’d choose Wal-Mart.”

For the time being, however, Wal-Mart remains the No. 1 target for union organizers, largely because of its size. The company employs 1.7 million people worldwide and is the nation’s largest private employer. Its sales totaled $285 billion in 2005, more than the combined revenue of Target, Sears and Costco.

Two national groups have sprouted up over the past nine months that have a single purpose — to reform Wal-Mart.

One, “Wake-Up Wal-Mart,” is funded by the UFCW and is run by Paul Blank, the former political director of former Democratic presidential candidate Howard Dean. In less than two months, the group has amassed 50,000 members, an army of people that can distribute information about Wal-Mart’s labor practices and to oppose new stores.

Union groups have to focus on Wal-Mart because until the nation’s largest retailer alters its labor practices, companies like Target will have no incentive to change, Blank added.

“No one here is excusing Target or anyone else for failing to live up to its responsibilities to its workers,” Blank said. “But how do you change these very large companies? You have to go after the source of the problem, and that’s still Wal-Mart.”

© 2005 Minneapolis Star-Tribune

Related:

Creating “Terrorism” Out of Misdemeanors

by

Bush Administration manipulating statistics on terrorism investigations, convictions

By Bert Dalmer 
First published by the Des Moines Register, May 16, 2005

Editor’s note: We posted this report by Mr. Dalmer last year, which exposed some of the absurd cases classified as “terrorism” by the Bush Justice Department.

Newly released documents show that the U.S. Justice Department has greatly broadened how it defines and counts terrorism-related cases, a move that helped justify the department’s call for more funding and greater powers. However, the scant information provided about those cases has watchdog groups and members of Congress crying foul.

The criticism comes in the wake of independent reports suggesting that federal prosecutors have overstated their success in preventing further terrorist activity and attacks. Among the terrorism cases that have been identified in Iowa: the arrests of three contractors, all American, who failed to report drug convictions prior to starting work at airport runway jobs.

“I don’t know why they would call those terrorism cases,” said U.S. Sen. Charles Grassley, an Iowa Republican. “They are obviously not.”

Justice Department memoranda obtained by The Des Moines Register under the Freedom of Information Act show officials loosened record-keeping practices and broadened the definition of terrorist crimes before the department reported a surge of new terrorism-related prosecutions in the years following the Sept. 11, 2001, attacks.

The records show that top officials instructed federal prosecutors nationwide to catalog their work in ways that served to inflate the number of terrorism investigations. Even tips that were immediately disregarded, the memos show, were to be counted as terrorism-related investigations.

The higher numbers have since been cited in budget requests and in defense of the expansion of police powers, such as those granted by the controversial USA Patriot Act, which is up for renewal in Congress this summer.

Grassley, the senior member of the Senate Judiciary Committee, said he and his staff were “oblivious” of the changes in how terrorism cases were being counted. He said he has yet to hear back on an inquiry he made in early 2004 into massive discrepancies in terrorism arrest figures that the Justice Department presented in two different settings.

“I’m always cynical about (the executive branch) padding the numbers to justify more appropriations,” Grassley said. “If it’s found that’s the case, we ought to raise Cain with them, so they know that we’re watching and they aren’t going to get away with it.”

Justice Department representatives failed to return repeated messages seeking comment. In the past, officials explained that the sharp increase in cases was a reflection of a renewed vigor to disrupt terrorist threats.

In one Justice Department memo in 2002, a top official emphasized to prosecutors that following the new statistical guidelines was of utmost importance.

“We know that over time we will be called upon to report on the volume, type and outcome of your terrorism and anti-terrorism matters,” Deputy Director Theresa Bertucci wrote to federal prosecutors. “In an effort to account completely and accurately for all of your work, we must capture all terrorism and anti-terrorism matters and cases.”

In the past, some prosecutors have said that they sometimes charge people linked to terrorist activity with lesser crimes where evidence is weak, just to see that they are deported. They also want credit for investigations that seek to detect terrorist activity but which lead to arrests not related to terrorism.

“The fact that many terrorism investigations result in less serious charges does not mean the case is not terrorism-related,” former department spokesman Mark Corallo said in 2003.

However, the Justice Department has also rebuffed calls by Grassley and other officials to support its claims with case particulars that could put the public more at ease.

“Since Sept. 11, Americans have been asked to accept restrictions on their liberties. They deserve to know what they are getting in return,” said U.S. Sen. Patrick Leahy, a Democrat from Vermont, in a hearing on the Patriot Act last week.

This year, for the first time since the Sept. 11 attacks, the department omitted without explanation any figures on terrorism-related investigations and convictions in its annual performance report.

The omission followed an audit by Congress’ investigative arm, the Government Accountability Office, that criticized the accuracy of the statistics. The statistics account for the number and nature of leads from citizens and law enforcement agencies, and are grouped into crime categories defined by Justice Department policymakers.

In a series of memos sent to the nation’s prosecutors between September 2001 and April 2003, records show that the Justice Department:

. Required that any investigation involving a suspected terrorist link, even if unsubstantiated and unprosecuted, be counted as terrorism-related.

. Expanded the number of terrorism-related crime categories from two to six. Now, when federal authorities looking for terrorists make an arrest for other reasons, the case is logged by prosecutors as “anti-terrorism.”

. Exempted terrorism cases from a policy that generally counts leads only when prosecutors spend an hour investigating them. Unlike leads on conventional crimes, those on alleged terrorist activities are now immediately logged by prosecutors even if they are disregarded.

In the two years after the policy changes took effect, federal prosecutors were credited with winning 1,065 terrorism-related convictions. In the year leading up to the Sept. 11 attacks, prosecutors took credit for only 29 such convictions. Hundreds of additional arrests by the FBI and other law enforcement agencies have also been reported.

The Justice Department has identified few of the defendants, even at the request of Congress.

David Burnham, a Syracuse University researcher and author whose 2003 report on terrorism statistics provided new insight into the department’s handling of the cases, said the new reporting methods “of course would lead to more numbers” of such prosecutions.

“How much?” he said. “You can’t quantify it. There was an increase of government activity against terrorism, too.”

Burnham said he can appreciate the Justice Department’s interest in tracking the government’s anti-terrorism activities more closely. But he is skeptical that the jump in prosecutions was based purely on the initiative of federal agents.

“For decades, crime statistics have been manipulated for political reasons,” he said. “Many administrations have used that data to toot their own horns in inaccurate and misleading ways.”

Since the release of Burnham’s report, news organizations across the country have used the information to identify some of the government’s so-called terrorism targets: college entrance exam cheaters, check forgers, sham husbands and those who overstay visas, among them.

Of the 35 terrorism-related cases cited in Iowa in the two years following the Sept. 11 attacks, most that could be identified by the Register involved fraud or theft. Three were connected explicitly to terrorism: Luke Helder, an accused mailbox bomber who has not been deemed mentally fit to stand trial; and Youssef Hmimssa and Brahim Sidi, who marketed fraudulent documents to illegal immigrants, including members of a terrorist sleeper cell in Detroit.

© 2005 Des Moines Register